involving two hedge fund traders who are traded dell shares. that's another story to watch as the -- i don't know if the news gets tighter or maybe looser around mr. cohen himself. that's what i think everyone is paying attention to. shares of yahoo! hit hard in after hours trading. now forecasts current quarter revenue below analyst expectations as its plan to wind down some media contracts. green mountain coffee is a loser after the bell. shares hit by a weaker than expected outlook. the company facing direct competition from facebook. last month, the social network announced a new feature that let's users troll their network of friends to find everything from restaurants to movie recommendations. shares of news corp. falling

after the bell, earnings beat the street. analysts say rosy quarterly figures masked troubles at three of news corp.'s properties, most notably fox. the nation's retailers will report monthly sales today, costco post ago 4% rise in comps. and there were two after the bell winners in the space. shares of zumi's rising after the action sports retailers raised its forty quarter guidance on sales. i'm putting the gavel down and sending it to you, mandy. >> you have the gavel this morning? >> the gavel is at the desk. >> he has to like that. whenever he goes, he takes the gavel. why don't we take on the markets this morning for you and get you up to date on what is happening out there. of course, we're looking at an implied open that is marginally positive today. as for oil prices which had been

moving higher, ever creeping towards that $100 mark for crude, we're currency just below 97 right now. the ten-year, they're sitting just below 2% at 1 .993%. now we move on to the dollar. dollar/yen at 9. that is the one to watch, k, lots of comments out from various forex corners. i think the finance minister in japan this morning was saying, oh, the markets decide where the yen goes. of course, that is absolutely -- >> you're in the part of the world. you're from that part of the world wherefore yex matters. >> it really does matter. >> people think about that routinely. i think we're so ego sent rick, we don't think about anything for the most part. >> i'm always saying -- >> there are people watching who think about it. >> the dollar is king, i think. i started to say that. >> let's do a currency segment

where people go, oh, the dollar and the euro. >> yes. anyway, we're going to be watching what happens later on. ecb meeting, draghi, we're expecting hopefully strong words out with regard to how strong the euro has been recently and how weak the yen has been. you're up to date, gold sitting at 11677. >> markets physicianed fractionally lower yesterday at one point falling deep into the red. phil orlando, from federated investors and ben white, chief economic correspondent at politico. also here with us is david joy. it's great to have all you guys here. phil, why has the rally stalled? >> well, we've gotten out of the gate in terrific shape here. the stock market, the s&p is up about 6% the first six weeks or so of the year. we've got a very constructive full year forecast of 1660 on

the s&p, which would be a record high. but we didn't think we were going to go straight there. the reality is that we've had a terrific run. the markets are a little bit tired. you've got some washington-related news coming up over the next month or so. we would expect that this would be a perfect opportunity for, you know, a 3% to 5% pause. and i think we're starting to see that reflected -- >> up to 5% is almost the whole thing. >> well, look, a week from now, president obama is going to do his state of the union address, okay? typically the market doesn't respond well when the president talks. then we're going to start to get into some of the nitty-gritty, some of the spending issues. that would be a perfect opportunity for the market to give half of that back. so we've had a 6% rally. why not, you know, reclaim three of that percent over the course of the next few weeks. >> do you feel like we're acting a bit bullish with regard to the markets? i get the feeling it's more buying from kaufton as opposed

to selling at this point, right? >> i think that's right. first of all, you've approached a couple of psychological hurdles on the dow and the s&p. we've seen what earnings season is going to give us. we're approaching the sequester cuts on march 1st and there is an increasing belief that they're going to be triggered. and so when you add on to that the fact that payroll taxes went up and the economy is going to be pretty sluggish here in the first half of the year. so i agree with phil that we're probably going to give back a little bit of this rally that we've enjoyed. maybe about half of it sounds right to me. >> are we underestimating the impact of the sequester on the markets? it's not that far away. >> yeah, i think we are. we have a poll that says market insiders, hedge fund managers see a 5% drop on the dow. that's 86 billion that hits. hits a lot of furloughs across the government, transportation, security officials at airports not being on the job.

we've got 1% economic growth, you add $86 billion in spending cuts on top of that, it will be pain across the board. the question is, do people freak out to come to a deal? >> i think i got an early version of morning money this morning and you let with that story. the disconnect, though, that i can't get is are hedge funds hoeding tight? meaning have they come out of the markets in the last couple of weeks as the run happens? is that what the suggestion was? >> that sort of suggestion, yeah, thinking markets are going to tank and the opportunity to make an arbitrage there. i don't know the extent to which that's across the board hedge funds. there is question whether smart money thinks the sequester is going to hit and done money. >> that suggests that the smart money has missed a bit of this front. >> that's true. >> the smart money hasn't been that smart, right? if you look at the performance last year, the so-called smartest money turned out not to be the best performing money.

>> i think the assumption is that washington gets to a deal like it did the last time on the fiscal cliff. >> and you say they don't. >> if you asked me yesterday i would say no. today, it's hard to know exactly. >> the prolific deal at the last minute, the market goes through this whole tumultuous period where there's a lot of fear, they're not going to get the deal done. >> the question is, are the consequences big enough this time to bring the two parties together, democrats to spending cuts. the last time with the fiscal cliff, it was armageddon if they didn't get a deal. complete economic meltdown. >> we won't nail you down on that prediction. you're here as a guest host. >> i would say at this point, 60%, the ee zester goes into effect. >> we do not need silver statistics. >> panetta's speech yesterday where he said we're moving aircraft carriers out of the gulf, that scared people. there's a lot of republicans who

have big military backgrounds in their district. the armed services committee chairman said i'll be willing to accept tax increases if we can get this thing done. >> it's moving on the republican side, then? >> it's not all bluster. they want real spending cuts. they don't feel that they've gotten them. they think this is one way to get them without having a huge impact on the economy. so the risks are higher than on the fiscal cliff. >> if you don't get a deal done, the dow would fold more than 5%. right? >> i think we got an early look at that very point when we saw the flash for the fourth quarter gdp. there were two big drivers in there. the inventory to stocking and the defense cuts. so if that part of the sequester, remember defense is half of the sequester goes through, we could be looking at much slower gdp growth. now, our forecast for this year is 1.5% positive. that's maybe about half a percent lower than consensus, but whether we're right or the consensus are right, both

numbers are terrible. we're not at trim line 3% growth. so i think that the politicians are start to go freak about what the implications are for smarter growth, based upon the full complimentation of this sequester. >> and, like, we will be thrilled to have 4% or more growth. now it's like 2 point something, that's okay. but certainly for less. >> there are two key drivers here. there was an economic impact from sandy, we felt, in the fourth quarter and the fist quarter. that will become a tailwind in the second quarter as we start to rebuild. the other issue is with washington. at what point do we get through all the nonsense? our view is that something happens positive. we're opt misters and that gdp growth begin toes ramp over the back half of the year. per se, we don't know that. there's a giant cloud of uncertainty as to what actually comes through washington. >> david, if we get a 5% or so fullback or anything close to that, would you be a buyer on that? >> i'd be absolutely a buyer.

i'm a buyer now, really, for the longer term. i think whatever fall out there will be from a sequester trigger will be temporary. and is, in fact, i think in the longer term, it will be viewed as a positive because this is the only way we're going to get spending cuts in washington, so be it. it's not the way anyone would prefer it to happen, but i think there's a positive spin on this because it would improve the balance sheet. but yes, i like equities. i think they're reasonably valued. i think earnings growth is going to continue, especially in the second half of the year. the fed is still printing money as fast as they can. so i think equities have a lot going for them. >> you have a year-end target on the s&p of 550, 1600, right? >> yes. in january, i was feeling as though that was a little bit light. i still think it's reasonable, but, you know, that suggests that stocks are going to rise commensurate with an average year of earnings growth and is that's pretty good. i think certainly stocks look a heck of a lot better than bonds

at this point. >> david, thanks so much. phil and ben will be sticking around for the rest of the hour, so we'll have much more of their thoughts coming up the. >> i think i'm with david. >> i think this pullback we think could happen, people are seeing through it and that may mean you never get there. anyway, we'll talk more about that. coming up, squawk takes flight. we'll talk about boeing's efforts to get the dreamliner back in the air. plus, we have a possible deal we know amr and usair. we're going to talk to mike floyd next. he'll always ready to speak his mind. but first, take a look at yesterday's winners and losers. >> oh, boy, i'm rich. i'm independent. i'm secure. i'm rich. >> you stink and i don't like you. our first full team gathering! i wanted to call on a few people. ashley, ashley marshall... here. since we're often all on the move, ashley suggested we use fedex office to hold packages for us. great job. [ applause ] thank you. and on a protocol note, i'd like to talk to tim hill

about his tendency to use all caps in emails. [ shouting ] oh i'm sorry guys. ah sometimes the caps lock gets stuck on my keyboard. hey do you wanna get a drink later? [ male announcer ] hold packages at any fedex office location.

welcome back, everybody. good morning. welcome to sidewalk. as we can see here, and i feel like the weather girl, but u.s. equity futures are feeling slightly higher today. we have a couple of quarterly results hitting the tape in the last few minutes. cigna reporting earnings and revenues ahead of estimates. earnings topping estimates by a nickel. we're going to continue to follow both of those stories for you this morning. scotty, back over to you. some mandy, thanks so much. now over to the weather channel. eric fisher joining us to talk about this major winter storm heading our way. good morning. >> this could be one for the

record becomes here over the next couple of days. it starts in the midwest. not to ignore what's going on here across michigan, wisconsin. chicago, sleeting rain, sleet this morning, a bust of snow this evening. biggest snow totals, eastern michigan. the bull's eye is right around sagin saginaw. so difficult travel there. the cold air and this slipper moving through the states. then we've got the rain across the south. that's ingredient number two. area of low pressure there that keeps a wet day for new orleans over towards atlanta. and then that turns the corner and it comes up the coastline. as we head towards tomorrow, those two systems meet up and become one much stronger form for us in the northeast. heavy snow will blanket the region and we are talking about big snow totals. it is february. it snows in the northeast, but this could be an exceptional event. winter storm watches, that whole area in blue.

winter storm warnings, right here in orange, you have a blizzard watch. providence, cape cod, strong winds, maybe over 60 miles per hour. low visibility and a whole lot of snow. how much snowfall? well, this whole area in purple is a foot or more. rhode island, connecticut, maine, you're all into there. locally, we could see over two feet. this would be your sweet spot here in new hampshire, around boston, in the suburbs and down towards northern rhode island. new york city, in is a tricky forecast for you. you're right on the line. we know it's going to snow. the question is, how much is it going to snow. we've got you in the 6 to 12 inch range right now. that would be the biggest storm of the year so far. northern new jersey, some big snow totals and in lesser amounts if you move south and west. don't think you're going to have to go very far to get into the north or east to get into the bigger snow totals. poughkeepsie, eastern long island, things will be

significantly worse than we see in the city itself. timing there is late tomorrow and into tomorrow night. you see amounts tapering off as you head farther south and west. the idea here is that a lot of people see a foot of snow. some people say two feet of snow. maybe in a few spots in and around boston we could see three feet of snowfall out of this one. your top five snowstorms, the biggest, presidents' day in 2003. some model res saying we may beat that total in boston. not written in stone, but these are ones that everybody remembers. we stop that, that indeed will be something to talk about. travel tomorrow and into today, that's not going to happen. rearrange your plans. >> some snow good. three feet? no good. right? >> yeah. >> unless you operate a ski place or you want to go skiing. >> my regular flight to teeter teeterbor on is out of the question. >> private jets have a little

more leeway in getting out. eric is going to get me a specialized weather forecast for teeterboro. in the meantime, airline webs two developing stories in the aviation industry. boeing may have another battery plan for its troubled dreamliner. also, we have a new mega deal coming closer to us. joining us from denver to talk about this, you guys have snow out there, michael boyd. skiing is good right now in colorado, correct? >> it's great. >> before we get into the important flight stuff. >> great skiing. come on out. >> let's talk boeing first. you see now there is a plan for a new battery strategy. what do you think it means? >> well, i think they're probably going to find a new battery. who knows, they might have hired the energizer battery. but they're going to find something to replace the current system, give the faa something to talk about so they get the air mines in the sky again. >> what does that mean in terms of flying? >> it could be a week, it could be two weeks.

this is something isolated to one area. it's easier to find rather than if you have a structural problem that could take a year to fix. it could happen quickly. >> hold on. if they're replacing the batteries or changing the structure or how they're going to replace the batteries, it's only going to take two weeks to get them in the air after they say they've been testing them for three years and millions of miles? >> it could be. if they find a fix, the result of that fix will probably happen very quickly. >> i understand that boeing had asked the faa to be able to do some test flights. in other words, to get off the ground and to be able to see whether or not the air conditioned change anything with regard to the cause of the problems. i understand that they are allowed to do one flight, but one flight only and under very strict conditions. is that right? >> that's what i understand. because the faa wants to be very careful we don't have an airplane suddenly fall out of the sky for the safety of everybody. >> do you think it's a good idea that they get up there? do what it takes, right, to find

the problem. >> we're dealing with professionals. the people at boeing have any idea that that airplane could have a major problem in flight that could cause a safety issue with the plane to go down, there wouldn't suggest it. >> michael, let's talk deals for a second. we thought something like this usair/amr deal would happen. do regulators allow it to happen? >> they better. they've allowed every other merger since roughly 1980. this one here, there's no real down sooitd to the consumer. i have a knee jerk thing about combining airlines, but the reality of it is, this does work. it will be good for the consumer. there's not a lot of overlap. america will get new management and new blood. going forward, i think it would be a positive thing for everybody involved. >> doesn't it mean higher prices for you and me? >> no, it really doesn't. the only merger in the last ten years that's caused any reduction in real reduction in pass is the southwest air tran merger where some communities

got hammered. but if you look back at the other mergers we've had, it has not them themselves driven fares up. airlines are trying to price this to make their payroll. >> i was reading one of the notes that you had written. there's a suggestion that the biggest problem this poses is ultimately a competitive one, not in the u.s., but that it doesn't advance the game for americans internationally. >> americans are a member of the one world alliance. the free alliances, one world sky team and star. the one world alliance has no real world access to china. you need a china partner to connect all these markets to china to the u.s. and latin america. and this merger won't fix that problem. they're going to figure other ways of doing it. right now, their competitors have an advantage of slowing that traffic and is it's going to be huge. >> i understand there's been some disagreement from both sides as to what the potential benefits would be of this merger with regard to the cost savings and the additional revenues. do you have an estimate on how

many it would save? >> you know, all of these mergers have said they're going to save the world, let alone money. in this case, i think you'll see a couple of headquarters, but ov overall, it's end to.end. the real issue is the revenue stream and the increases in revenue streams by putting these airlines together. >> american express membership miles, they work on us airways, don't work on american. what will happen? >> i don't know. they better be or i'll be ticked. >> it's a generous people. >> there's a lot of people in the audience who want to know the same thing. that's frankly all i care about. michael, great to see you. i'm sure we'll be speaking to you as we see what happens with the transition and with boeing. coming up, it's suggested that jpmorgan could have known about some loans with instruments.

all the details, next. and merit on, do not miss our newsmaker of the morning, former treasury secretary robert rubin in studio for a squawk interview. a squawk exclusive at 8:00 eastern. come on, nowadays lots of people go by themselves. no they don't. hey son. have fun tonight. ♪ ♪ back against the wall ♪ ain't nothin to me ♪ ain't nothin to me [ crowd murmurs ] hey! ♪ [ howls ] ♪

this is america.

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welcome back to "squawk box" here on cnbc. i'm andrew ross sorkin along with mandy drury today and scott wapner. becky quick and joe kernen are off. they're going to join us live tomorrow for a special broadcast from pebble beach. they have some pretty cool

guests themselves tomorrow. you don't want to miss that. >> did you draw the short straw or the long straw by not going? >> that's good. i don't play golf. so i don't think becky plays golf, either, so we'll see. we're all rooting for joe, who is playing. we hope he makes the cut. >> okay. we're rooting for joe. >> we all have to root for joe. i don't know if becky carries the bag or if she drives the cart. i don't know how it works. she's not going to like that comment, but we do love both of them, of course. our guest host this hour, chief equity strategy phil orlando and ben white of morning money fame. let's talk about the headlines this morning. a story in the "new york times" today looks at documents filed in federal court this week that relate to jpmorgan. the document suggests when an outside analysis uncovered serious flaws with thousands of home loans, the bank didn't disclose the full extent of problem, apparently overextended borrowers. rather, jpmorgan adjusted the

critical reviews as a result. this is what the lawsuit is saying. the mortgages appeared healthier making the bundled complex securities more appealing to investors and internal e-mails and employee introduce were filed as part of this lawsuit by one of the investors. let me go to ben white. ooefb following wall street for a long time. is this important, not important? are they idiots? were they duped or are these sophisticated folks who are now just trying to -- >> they're sophisticated folks but if they're not getting a full picture of what is in these securities. i think it's important because it's a precedent setting lawsuit. a lot of the other banks are watching it closely and it's jpmorgan who for the most part has come out of the crisis looking fairly good. if it's true that they've massaged these mortgages to look better than they were, it's problem for them. >> do you buy this or is it monday morning quarterbacking inspect and i say that with the suggestion that i read through

this s&p complaint. i don't know if you saw that. >> i did. >> and shockingly, they're suing on behalf of the federally deposited institutions like citigroup and bank of america and guess who was underwriting these bonds that they're suing over? citigroup and bank of america. >> the technical reason why they're doing ta that so they can get around the freedom of speech article. >> but it also made me think there might be an element of monday morning quarterbacking. >> i think there's a legitimate concern. separate yourself from the jpmorgan situation and take a step back. this aplayal situation has been a morass throughout the industry. the banks are legitimately doing a better job of trying to loan more money, the appraisal process has been a disaster. the fact that investors didn't know at that time how bad it was is significant. >> i think the process right now is terrible, as well. it's gone the other way. there are people who, you know, might otherwise normally qualify

for a loan or a re-phi, just can't get it because the appraisals are coming in so conservati conservative. >> and there's a question of whether the banks are saving themselves from banking bad loans, to slow-ball the estimates. >> in the meantime, why don't we take a look at my favorite subject. for ex, the japanese yen is taking a nose dive hoping the auto industry will become more competitive. but it is not all good news. joining us now is camilla sutton. i guess it's good news if you're >> a japanese exporter, terrible news if you're on the other side of that trade. others are getting annoyed with how weak the japanese yen is being made right new. >> absolutely. we've had a few changes in terms of yen. we've had a 22% move in the last four months. it's been dramatic. in terms of what that means for trade, it's tremendous. so if you're an exporter sitting in japan, you have a very good chance. but the problem with yen is it's

been so strong for so long, we've seen a whole host of companies moving a lot of their exports move offshore to counter balance the strong yen. now that we've had four months of a weak yen, we're seeing a lot of the corporates coming out, even sony coming out and telling us they're able to keep their guidance strong because they're expecting about 180 million of gains because of the fx. the flip side, though, is that if you're sitting in the rest of asia and you're trying to compete in japan in terms of autos or electronics, it's a very difficult ball game. i think the implication is that we have monetary policy expected to be so loose in japan, the retaliation of some of the other central banks either through currency intervention or through very, very loose policy is real. so in currency markets, we have very exciting times in terms of what policy is doing to currency and how quickly some of these currencies are moving. >> so let's bring this back in terms of dollars and cents or yen if you like. where do you think the dollar/yen or euro/yen is going to go?

we've seen a 20% move upwards in euro/yen. do you think that draghi later on today is going to have some strong words about that? >> draghi is a key piece today. when we look at what draghi has said up to now which is that he doesn't comment on the currency, i think we're going to see to hear a bit more of that, though a slightly more cautious tone than we've heard. right now, euro is strong against everybody. euro is strong against everybody. but when it comes to yen, i think that the trend is just too hard to fight right now. so we really have to wait until we start to see the trend top out before it's time to pick a top in dollar/yen. the truth of the matter is, the fundamentals have dramatically changed and we have a deterioration in many of the things like the trade balance. all of that combines where yen should be weaker. >> is there such thing in currency markets as the trade getting too crowded, camilla, or does that not factor in

anything? the dollar/yen trade is starting to feel easy. that makes everybody cautious that we're getting towards the end. it's been very, very painful if you're trying to pick the stop. i think we have to wait to see signs at the top before you move towards it. typically what we see is it's been about a 20%, 25% move where we've seen these big shifts. we're getting close to that type frame. i think it's just a little bit too early, still. >> i noticed the boj governor is leaving earlier than he normally would have left. in other words, before the end of his term. do you think the government in japan, the new government under abe pushed him out to get someone more aggressive? >> he's leaving three weeks early, timing it with the leaving of his deputy governors. i think what's important is the government appoints the next head and we're likely to see

somebody dovish. most likely we're likely to see someone who supports the bond buying from japan from the bank of japan and that would be very negative for the yen. and i think that's what markets are pricing in right now. when we look at the list of candidates and we look at who the top spots seem to be, the government is likely to appoint two governors who are very dovish and likely to follow the new politics in japan. that is likely to put pressure on the yen. the big meeting will be -- i think it's april 3rd, right at the beginning of april there where we'll have the first meeting where we'll have the boj and the new governor in place. that's where the real excitement will be. >> before we let you go, camilla, give us news that we can use in terms of the fray here. what should people be doing if they want to make money in forex right now? >> i think the big risk is probably g-20. that's february 14th, 15th, and we're like leg to see some terminology. it's not a disorderly move, but

it's lickly to see some terminology heat up. then i think what we have is the green light for dollar/yen to continue to move higher. so i think between today's draghi comments and next week's g-20, that's when the real ideas come through. for now, i would continue trading through these trends. over with rsi being overbought at 77 for dollar/yen, we have some upside here. >> thank you very much for joining us, camilla sutton. >> the trade that traders talk about a lot as a result of this weak yen is toyota. toyota is the way to go if you're looking tore trade currencies, you don't want to do necessarily the dollar/yen trade. to go to toyota, right? their pricing becomes more competitive here in the united states. you have to believe that a general motors or a ford is certainly watching this situation closely and how it is going to relate to its own pricing competition here in the states. >> it was only a couple of weeks

ago, right, that the detroit three actually actively came out and asked the obama administration to get tough on japan because, obviously, keeping the japanese yen so weak is giving them an unfair advantage. so if you're long nikkei or long basically exporting stocks in japan like toyota, you have to be short the yen, you have to be negative the yen. >> coming up, all aboard the market train. we're talking dow transports and why bulls are very excited to be riding the rally. dow transports trekking up to an all-time high. but do the fundamentals? ♪

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dow transports trekking up to an all-time high. to some extent, does the bull rally? don, welcome. it's good to talk to you. >> good to be here. >> dow fears what happens with the transports. they're giddy. they're saying it validates the move that wove seen overall in the market. the question is, is it going to last? >> i like to look at the underlying goods flow. the stocks themselves are not omniscient. you're getting a very different story when you look at the underlying goods flow. >> in what way? what is the most telling sign that you see? >> truck tonnage is the leading indicator.

historically when you go back and look at it, it's predicted eight of the last six recessions, it's predicted. i like to separate it between good guys and bad guys. the good guys are simple. we have e-commerce. we're up 14%. you saw domestic air freight up 3%. we expect good results out of fedex when they come out in february. we saw good results out of u.p.s. which just released a few weeks ago. that's good news. the other good news is fracking. we have cheap natural gas, we're pulling enough oil out of theda. up more than 50% since the trough 37 bur that's pretty much where the good news ends. truck tonnage is down 5% in december. we know the results for january were also negative. we're seeing fall falloff in ov

overall rail carloadings of 4%. coal is down another 15%. metal, metal ore is down 4%. ag is down 4%. >> but the market's been able to look past that for some time, right? this didn't just happen overnight. it's not like the fourth quarter wasn't gang busters for all of those internal metrics that you say but the market has totally looked past it. >> well, this is true. this is true. but as yogi berra said, i don't want to make the wrong mistake. what has happened again and again and again is the truck tonnage leads the way. and truck tonnage has not only been decelerating throughout the year but it's continued to decelerate. and so as you see weak truck to beage. you see week consumer spending. we see taxes go up, we see weak, planned business spending. you have to be a little bit more cautious than the market seems to want to be right now. >> business investment is up, and i saw, i think dana telsey was on a program preceding this one on cnbc saying that actual january trends in retail look pretty good. i mean the airlines have done

well, also. >> i hear you loud and clear. but then why are -- why is truck to beage down? if retail is doing so well, where are those goods coming from? when you look at the volumes of containers coming into our ports, you look at the volumes being moved by truck, it's negative and that means there's less product somewhere being moved, being sold. >> so if we went to the declining trucking tonnage as the leading indicator that is not boding well, what are the implications for an investor in this space? don? >> well, it implies that most of these companies are a little bit ahead of themselves. that most of these stocks are fairly or fully valued. we recommend things like union pacific because we're moving all of those chemicals. moving all of the by-products coming out of the -- those chemical refineries in the gulf. they're also moving all of the intermodal traffic. we've seen decemberal prices stay stubbornly high so more

intermodal traffic as people continue to shift things off of the road onto the rail. >> don, there were a number of union related problems with ports on the east coast and west coast during the fourth quarter. could that have any impact on some of these declining volumes that you're talking about? >> it certainly could have. we saw interruptions with the labor issues. we saw interruptions as a result of sandy and we've seen that reflected in pricing. people, that were able to stay open for business despite the weather, it would be able to exact a larger price for their services. but that said, the overall macro trend for global trucking, from trucking across the united states, is negative, and if that's negative, that couldn't be negative just because of a port eruption, clerical workers threatening to strike or a storm. >> don, thanks so much. have a good morning. we'll talk to you soon. >> thank you. >> all right, don brown. >> we're going to take a quick break. first let's take a peek inside the "squawk" green room.

we've got the professor in the house, stanford's john taylor. why he says the economy is stuck in neutral. then in the next hour, earnings and outlook from the whoa of media giant iac interactive. plus we've got a big newsmaker this morning, former treasury secretary robert reuben live in the "squawk" studio. he's not been here in years. all coming at 8:00 eastern. you don't want to miss it. tomorrow, a special edition of "squawk box." live from pebble beach. former yahoo! ceo carol bartz will be our guest host. we'll talk to at&t chairman and ceo randall stephenson. plus, the legendary clint eastwood. >> people have to get creative when the pressure is on. >> it all starts tomorrow at 6:00 a.m. eastern. [ male announcer ] i've seen incredible things.

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we've just commenting on how fast the hour has gone. you know it goes fast when you're having fun. this hour's guest host, we have phil orlando and ben white. you put out a note about the january effect and it was the best january we've had in many, many years so far in february, though, it's been somewhat of a damp squid. where do we go from here? >> i think you've got countervailing points here. 5% up in the month of january. we looked, there were 19 instances where january was up 4% or more in every instance, the market inished a full year positive up on average of about

22%. the long-term signal is good. we've got a 1660 full year target but we don't think we're going straight there. looking out over on the horizon, state of the union next week, we've got continuing resolution on march 27th, the sequester on march 1st. there's the potential for an air pocket. we would use any weakness as an opportunity -- >> 1660, that's 15%, 20% return? >> exactly. we think you've got a 15%, 20% return. we think you hit a record high on the s&p by the end of the year. >> i got to go to ben real quick. there is a market for this, tim geithner is writing a book. you are mr. washington. how much is the tim geithner book go for? >> well, we were talking about that a little bit off camera, i think you're probably right. somewhere in the million dollar range for the advance, and then, you know, who knows on multiple -- >> is this the black buster book? >> we wrote a story yesterday saying he's going to settle scores, talk to his critics about t.a.r.p. and the criticism that he bailed out wall street.

the executives there. the opportunity for him to do that. i don't think he's going to do it. he's more of a professorial type, arguments for why, what they did, the t.a.r.p. bailout was the only option. >> will it sell? >> i think it will sell. that's the dichotomy, he'll zaz it up a little bit. he'll have to address people like sheila bare. >> that's why it could be interesting. >> those people have taken a lot of shots at him. while he was in office he had to back off and say he did this for this reason and that reason. he could say, what do you want me to do? let the bachs fail? let the economy go down? >> we did a twitter poll yesterday on cnbc joking around a little bit as to what the title of his book should be. i think some of the -- >> the world according to t.a.r.p. >> treasury island, money boo-boo. >> i like world according to t.a.r.p. that was my idea. there's plenty of ideas for the book. i think it will be an interesting read. he's got my number.

>> he's not exactly a ghost writer. he said i'm not a guy to sit down at a desk and do a lot of writing. you have to write to write a book. >> he's not the best storyteller. >> he's not. >> when you do interviews with him -- >> he doesn't like to talk about himself. >> so i think it could be tough. >> he's going to have to jazz it up a little bit. people want to know what happened. >> bob barnett is doing the work? >> he does everybody big in washington. >> i say between 900 and 1.2 million. >> i'm going to go 1 mine 5. >> price is right rules? >> exactly, right. so 1.3, then. gone over a bit. >> the show case showdown. >> love it. all right, guys. >> and the judge can judge what happens. >> gentlemen, thank you very much for being with us this hour. still to come we're building up to the newsmakers of the morning. former treasury secretary robert rubin, a cnbc exclusive at 8:00 eastern. plus chicago fed president charlie evans talking about the central bank's next move. but first we'll welcome a visitor from the west coast, stanford pro-first irjohn

taylor. find out why he argues easing is hurting the economy. come on, nowadays lots of people go by themselves.

no they don't. hey son. have fun tonight. ♪ ♪ back against the wall ♪ ain't nothin to me ♪ ain't nothin to me [ crowd murmurs ] hey! ♪ [ howls ] ♪

it's a power money hour. former treasury insider and "squawk" market master john taylor. plus carlyle's oliver sarkozy. >> and searching for profits. iac interactive's ceo on his company's earnings and outlook. >> plus the tools of the trade. what you need to know before another busy trading day ahead. second hour of "squawk box" starts right now.

mandy drury and scott wapner sitting in for joe kernen. and becky quick. but, of course -- >> she's only gone one day. >> joe has been gone all week. they're out in california. they're going to be bringing us a special broadcast tomorrow from pebble beach, and you don't want to miss that. let's take a quick look at the futures. dow looks like it would open up about 4.5 points higher. s&p 500, virtually unch and the nasdaq off a point. this comes as we have a little bit of a breaking news crossing the wires. the bank of england announcing a decision on interest rates. leaving the key rate unchanged at half a percent, which was expected. also we have a number of corporate stories on our radar this morning, including this one. two in the aviation industry. american airlines parent amr and us airways said to be hashing out the last major details of a merger agreement. also boeing reportedly working on battery design changes that would minimize fire risk on its

grounded 787 dreamliner. we talked to industry expert mike boyd earlier on "squawk" about that battery issue. >> probably find a new battery. who knows they might have hired the energizer bunny, we don't know. they're going to find something to replace the current system. this is something isolated to one area. so it's easier to find, i would say. rather than if you have a structural problem that's going to take a year to fix. it could happen very quickly. >> we've got a virtual who's who of power players on wall street on the show today. among them here it is exclusive newsmaker of the morning, treasury secretary robert rubin. he's going to join us on set for an extended exclusive conversation at 8:00 eastern. he has not been with "squawk" for many, many years. so this will be a good opportunity to -- >> what did you do to him? why did he disappear for is amany years? what did you say to him? >> i didn't say anything. there were some other things that interceded. then chicago fed president charlie evans is going to sit down with steve liesman at around 8:30 eastern. but don't worry, you don't have to wait until then to hear some

interesting voices on the central bank, because on set we're happy to say, stanford professor and former treasury official himself john taylor is here here discuss. let's go to scott. he's got the morning headlines. >> thank you. what might be considered a surprising partnership, yahoo! and google have signed a nonexclusive marketing agreement. retailers in the northeast stocking up on storm goods ahead of an anticipated weekend storm. home depot, target, lowe's among the companies telling cnbc they're taking steps to deal with anticipated increased demand for certain goods that people anticipate they'll be stranded at home because of weather, and it's supposed to be bad in the northeast. standard & poor's has hired a top white collar defense attorney to help fit a $5 billion government lawsuit over ratings. san francisco based john keeker has represented lance armstrong to enron's andrew fastow.

>> back to the big developments from the aviation sector this morning. boeing's plan to fix the 787 battery problems and a merger to create the world's largest airline. phil lebeau has details on both stories. which one would you like to start with. >> let's start with the american/usair because i think a lot of people are going to look at this and say, what? we've been hearing about this for some time. when is it finally going to be finished. i talked to one person this morning familiar with what's going on, involved in the discussions between american and usair, and they tell me that they are close to having this thing wrapped up. but close means it could happen in the next week to two weeks. there've been some reports out of dallas that we'll have an announcement early next week. i've been told that might be a bit optimistic. i think we're still probably at least another week out. this still needs to be approved by the amr board because this would happen as they exit bankruptcy, they have not finalized all of the details in terms of management, as well as some of the other things. but we do know that in terms of management, doug parker, who is the usair ceo, he would be the ceo, and effectively run the new

airlines. the new american/usair. what happens to tom horton, who is the current ceo of american? that still needs to be finalized. there is some discussion about him taking a position as an honorary executive chairman, or perhaps executive board chairman, with a little bit more power. although i was told this morning it's unlikely that he's going to have a whole lot of say in terms of how the airline is run once the merger takes place. if they are finally brought together, and again we expect this to happen within the next couple of weeks, it would create the largest airline in the world. larger than even united/continental. the unions have already approved the terms here, so what we're looking at right now is the final financial details and some of the management details being worked out by the creditors, as well as in bankruptcy court. take a look at shares of lcc. remember american, because it's in bankruptcy, that stock is not really worth checking. but if you look at us airways over the last year, in anticipation of this merger, it's been moving higher. so that's the story with usair and american. now let's shift to the other

story, which involves boeing. and a couple of developments there. we talked about for some time that boeing has a -- has p/e tegsed to the faa to resume test flights as soon as possible. well we also know that they have asked the faa for a fairy flight of one of their 787 dreamliners to go from texas up to washington state. it is likely that that is going to be granted by the faa. meanwhile, "the wall street journal" reporting that boeing is proposing changes to the 787 batteries. those changes have not been finalized. but essentially it would make the batteries in essence safer when they're put back in the 50 planes already out on the ground. the ntsb out yesterday criticizing the faa certification of the 787. there is a press conference later this morning in washington. we'll hear more about the ntsb's thoughts on what's been happening with this 787. but listen to the chairman of the ntsb yesterday. it's clear we're a long ways from this being resolved.

>> we're working with boeing and the faa. they have some parallel activities going on. so i will tell you, we are going to have some information tomorrow but i think we are probably weeks away from being able to tell people, here's what exactly happened and what needs -- what needs to change. >> after debbie hersman made that comment around 10:30 yesterday morning, shares of boeing dipped down and then they came back. and that's been the story ever since the grounding took place on january 17th. they have continually moved higher. now there are a couple of dips in there. the bottom line is this. they are working on a solution when it comes to the lithium-ion batteries. in terms of changing the structure of those batteries. now whether or not those changes will be enough for the authorities to say, you know what, we think that this works, let's start some test flights, perhaps in a couple of weeks, we're at least several weeks out before they can say, okay, this is definitively what we have and what we're going to do to solve it. and the biggest issue is, if you don't have the root cause, are

the authorities going to say, we approve the changes in terms of the battery structure? but clearly it's a moving story along with the amr/usair story. guys? >> well, question on the amr story. what is the timing? why is this happening now? and you know, it struck me as you were doing your report, we were showing b-roll of these new american airplanes, right? so they are spending a fortune to redo their planes, a whole new logo system. i don't know if the ultimate combined airline would be called american -- >> it would. >> i hope for the 5789 of spending. but why now given that they've had this opportunity now for at least six to eight months? >> you've got the creditors. they have got a deadline coming up on february 15th. and by the way, that's not a hard and fast deadline. in other words, if they don't have a deal worked out, it's done. they can get that extended in bankruptcy court. and so that's what they're pushing for. they would like to have that done. the creditors believe that they're fairly close in terms of all of the financial details. getting this all worked out. so, that's what's driving this right now.

and the other thing, andrew, they want to get this done, in bankruptcy, and come out of bankruptcy, as a merged airline, as opposed to what was originally being considered by the american board, which was let's do this on our own, and then we'll become -- we can talk about a merger with usair. usair has been pushing all along with the unions, by the way, to get this done in bankruptcy court so that's what's driving it right now. >> okay. thank you for that, phil. thank you very much. i imagine we will see you -- we're seeing you almost every morning. happily. unhappily for boeing, probably. >> getting our money's worth out of phil these days. >> that is true. >> let's talk to our "squawk" market master. john taylor, professor of economics at stanford, university. also former treasury undersecretary for international affairs, and we haven't seen you in awhile so thank you for joining us. >> good to be back. thank you. >> market. a little toppy? i gather from some of the thoughts i've -- i've read that you've had. >> not so much the market that's

toppy, seems the economy and the market is broader set of issues related to the whole world economy, i think the u.s. show shows it's going to be a pickup. over 1.5%, which is what we had in 2012. so i think there will be a pickup. i really worry it will be just 2%, 2.5% growth for the year and that won't be really good. >> you recently wrote an op-ed saying you believe the fed was a drag on the competent. >> yes, i still do. >> why? >> they have rolled out every possible intervention you can imagine. it's confusing to the markets. and the low interest rates actually discourage lending. to some up all the things, i know they're trying to have those low rates to stimulate demand. when i look at them all it seems to me, after all the economy has gotten weaker and weaker as they've rolled out -- >> so it's counterfactual but assuming they didn't do those things where do you think we would be? and is there some policy on the other side that you actually think would happen? >> absolutely. i think if they hadn't done all

these things. by the way, all these things, i think during the crisis, during the panic, september, october, 2008 was great, then they continued with these emergency policies long after the emergency went away. and i think that has been counterproductive. i would have basically done the liquidity operations in '08. have them wind down, then try to get back to normal monetary policy. >> where we are right now, what would you advocate in terms of where they should start -- >> what i'm hoping is there will be a bit of a pickup this year and that will give them the excuse, if you like, to stop all these extra asset purchasing, to $85 billion a month, if you like that would be the first step, and then gradually, as i hope the economy recovers, it will be the opportunity to move off some of these and that will reinforce the recovery. >> you said in the op-ed, these are your words, zero rate policy creates incentives for risk averse investors to take on questionable investments. are you suggesting by saying that that investing in the stock market is questionable? >> i think, actually, the stock market is good to be invested

in. i think there's a lot of opportunities, not just in america. 50% of the profits coming from abroad. i think emerging markets are still quite promising. some risk there. but no, i'm concerned about really searching for yield, and sort of risky credit, if you like. going to operations which a lot 6 people shouldn't be taking those risks. pension funds shouldn't be taking those risks, but they're kind of forced to because the yields are minuscule. >> we're going to hear from charlie evans later this morning with steve liesman. he's one of the more dovish members. he's going to come out and say more needs to be done, not less. why is he wrong? >> just as i said, i think it's counterproductive. i think has try shows that monetary policy works well, works best, when we don't have all these interventions. just it's completely unprecedented. we've never seen anything like this. of course he wants to get unemployment rate down. central bankers always want to. i believe it's counterproductive. >> what do you think the -- if 6.5% is the current sort of target unemployment rate for the

fed, where do you think we would be if they aren't doing some of these things right now? >> it would be lower than it is now. and i would -- >> lower than it is now a by tick or lower than it is now by a full point? >> if they started way back when, like i would like them to have done back in '03, '04, '05, where they cut those rates so low, we wouldn't have nearly -- >> what would you do right now? >> as i said, i take the opportunity of a little bit of a pickup this year, hold off on extensive asset purchasing if you like to stop that, and then move gradually. has to be gradual. >> how gradual? >> because it seems like anything would shock the markets that would go in the opposite direction of where the fed's been going. >> of course, because it's a surprise. it's a surprise compared to where they are now. that's why i say all the time, the monetary policy you have to be gradual if you like and i think if they did that, the markets would like it. >> how realistic do you think 6.5% unemployment really is, though? when you consider that, you know, we've made a lot of gains in terms of technological

advances, companies have learned during the lean times to do -- to make do with fewer employees, become more productive, et cetera. i mean, isn't there kind of a structural embedded unemployment right now? >> i don't think it's nearly the concern. we could get unemployment much lower than it is now. much lower than 6.5%. i think there basically is no reason why we couldn't have an unemployment rate of 5%. what's tragic is we still have this high unemployment. what's even worse is people aren't talking about it very much. they think about the policy, they don't talk about unemployment being 7. -- >> has washington given up? >> it sounds like they have. the fed hasn't given up -- >> unemployment. >> unfortunately, it's not talked about enough. i think it's a real concern. >> okay. well we'll talk more. >> great. >> okay. coming up, a call on commodities. we're going to be talking metals, oil, and we're also going to ask what recent moves mean for the broader markets. but first, as we head to break, do check out sprint, the company posting a smaller than expected

loss just a few minutes ago. revenues topping the street. and also limited are reporting better than expected monthly same-store sales. do stay tuned. ♪

[ engine turns over ] [ male announcer ] we created the luxury crossover and kept turning the page, writing the next chapter for the rx and lexus. this is the pursuit of perfection.

open up about 15.5 points, dow jones almost unch. european stocks in early trading, let's see what's going on. ftse down marginally. cac up marginally. and the dax up marginally. >> the word of the morning. >> it's all marginal at this point. >> we've been tracking khadty prices. gold is rising slightly ahead of today's ecb meeting that could set the tone for the euro. platinum and palladium prices holding steady. and oil is edging up to close in on that $100 mark. let's get to our trading block now. talking oil is carl larry from atlas commodities. he's also president of oil outlooks and opinions and with us on set to talk precious

metals, sean, editor of the wealth report. sean, credit suisse was out with a note saying the era of gold is coming to an end. are they right or wrong? >> i don't believe that. they're wrong. basically, when trends would come to an end, if you were having a gold bubble pop, you wouldn't have gold consolidating for a year, year and a half in the 1500, to 1800 range. it's actually building a healthy base to launch higher in my opinion. i think that we'll see gold, you know, in the coming 6 to 9 months hit 1900, possibly $2,000 an ounce. >> what takes it there? their premise being sort of the ultimate fear is off the table and that in their minds gold is overvalued where it is now. are you banking, so to speak, everything on the fed? >> i think a lot of it is going to be the decline of the color. the color peaked out about june, july, broken one year uptrend line about august, and has been heading down overall since. consolidating lately but the next leg got us lower.

>> i saw an incredible headline this morning that said vehicle sales in china january rose 46% from a year earlier. i know plot numb is already in short supply. platinum demand is going to go through the roof, this kind of trend continues in the world's fastest growing car market. >> i think platinum, palladium head higher. obviously more autos come online with into china and into india. you know, americans have been holding off in their car purchases for years now. now they're saying, okay, probably the worst is over. i'm turning in this old car, i'm getting my new car so i think there's some renewed demand there showing up in gm's and ford's figures, toyota's figures. all this is putting more demand on platinum and palladium. i see this demand rising and platinum and palladium heading back to their old highs. >> carl the biggest variable for the oil market, china data coming in the very near future. ecb meeting today. what do you see? >> well, i still see what you

were talking about earlier, economic growth in the u.s. the last time we were at $100 was 2008. so i mean we're still a long way away from that. demand here is really what drives us. i think yesterday was a perfect example. we saw inventories rise in crude oil in the u.s. and yet we bounced right back up. so i think we're going to be watching those ecb numbers and the china numbers but also keeping an eye on how the u.s. does. >> if we go to 100 oil is the global economy strong enough to deal with that? >> sure. i mean when you look over the pond, over the uk, and see brent prices, you know, trading at $115, $120, nobody's blinking right now. and i think $100 here in america is just a number. we've been there before, we'll be there again. again i think there's a lot higher left here especially with growth coming back in. at 2.5% gdp we're looking at maybe 110, 120 without even thinking. >> is it possible that money has come out of gold and gone into

places like palladium? that's where the rise in palladium has come from as gold has suffered the other metals, industrial and otherwise have gone up? >> i think palladium and platinum both definitely took a back seat as gold's had its tear, silver had a big tear. as you had those two pull back, i believe a lot of money did roll over from those from gold and silver into platinum, palladium. also you had the south african mine strikes which really put deficits there relative to the demand that's there. that put platinum and both palladium as well. >> sean, thanks. carl, thank you, as well. >> okay. coming up, folks. details on some looming job cuts on wall street. and we're also building up to the newsmakers of the morning. former treasury secretary robert rubin, in studio. that's a cnbc exclusive, folks, at 8:00 eastern. plus, chicago fed president charlie evans talking about the central bank's next move. do stay tuned.

tomorrow, a special edition of "squawk box." live from pebble beach. former yahoo! ceo carol bartz will be our guest host. we'll talk to at&t chairman and ceo randall stevenson. plus, the legendary clint eastwood. >> people have to get creative when the pressure is on. >> it all starts tomorrow at 6:00 a.m. eastern.

welcome back to "squawk." barclays capital saying it plans to lay off 275 employees at three offices in new york. it's blaming economic factors for the layoffs. the layoffs are going to take place during a 14-day period beginning may 5th. how do we know this? the investment bank disclosed the plans through the department of labor. the federal workers adjustments and retraining notification act, which i didn't know too much about, requires employers of companies with 100 workers or more to provide notice 60 days in advance of a plant closing or mass layoffs. i would have thought that this would have constituted that. but, who knew. >> who knew? >> all right coming up. earnings central. iac interactive ceo greg blatt joins us with his outlook. interview you don't want to miss. come on, nowadays lots of people go by themselves.

no they don't. hey son. have fun tonight. ♪ ♪ back against the wall ♪ ain't nothin to me ♪ ain't nothin to me [ crowd murmurs ] hey! ♪ [ howls ] ♪

welcome back everybody, to "squawk box." in the headlines this morning, it is the busiest dave an otherwise light week for economic reports. we're an hour away from the labor department's look at initial jobless claims, as well as fourth quarter productivity figures. claims are expected to drop by 8,000 to 360,000. productivity is seen showing an annual rate drop of 1.6%. we are just a few minutes away from the european central bank's latest rate decision. that bank is expected to keep its key interest rate unchanged. but it will be followed by ecb chief mario draghi's news conference at 8:30 eastern and that, folks, could be very interesting viewing. in the meantime limited and costco among the retailers that have beaten expectations with their january sales this morning. limited saw a 9% jump in sales at stores open at least a year.

that is more than double street estimates. costco saw a 4% increase, plenty above consensus. over to you, andrew. >> thanks so much. iac reporting after the bell. the company's fourth quarter earnings fell 16%, as some losses operating losses continued in the media division. we're going to talk about all this and a lot more. joining us from new york and a first on "squawk" interview is greg blatt. iac chief executive. good to see you, greg. >> good to be here. >> let's talk about these earnings and then i want to get into some of the other issues around google and some of the other things talked about on the call with barry diller yesterday. let's go through the earnings. what does it say about the business the profits have fallen? >> well, i guess i don't really think about it that way. our operating profits were up dramatically over 36% year over year. the sort of reported earnings had a tax issue from last year. we let out some transaction related reserves that brought the tax rate down so i think when you look at the net income number that's not reflective of sort of the business going forward. where we posted, i think, the

11th or 12th straight quarter of plus 30% earnings growth. >> and clearly did beat expectations. you guys talked on this call yesterday about your relationship with google and about this issue of how they changed some of their policies and i'm hoping that you can just share with the audience what's going on. because it was pretty interesting. >> sure. i mean, we have a great relationship with google. they supply our sponsored listings for our search business which is effectively the advertisements that we serve in our various properties. from time to time, they adjust certain policies, about the way those advertisements are used. we had a big one over the course of the last weeks where sort of we and google worked together to come up with a change to the set of policies. it's probably the biggest one that we've had in a long time, and our business comes out strong. it has some impact in the near-term but i think overall leaves us in a great competitive position. we said we're expecting strong double digit growth in that business this year. so we actually feel great.

i mean when you have a relati relationship like that that's big over time issues can arise and you sort of then have periods of realignment which we have and we come out very strong. so we feel really good about it. >> let's turn this around for a second. were you in compliance with the new policy? and more importantly, are you frustrated as a partner of google? and by the way, you're not the only partner of google, that the policy and the goalpost, if you will, can change overnight? >> i think we've certainly been in compliance with all the policies that've been in effect. when the prior policies were in effect we were in compliance with them and there's been no question about that. they have instrumented some changes to some of the policies and we will comply with those policies. i do -- >> and specifically just explain -- >> frustrating. but really with respect to the last set of policies we worked with google hand in hand for the last several months to come up with them. i don't think they're exactly what we would have crafted if we were working alone, we weren't and overall we support google's

efforts and intent at sort of making sure that the business is good for advertisers and good for consumers and we think that's best long-term. >> you guys had a tool bar. other partners have had tool bars that you can download, put on your browser, but there have been questions, google was changing in terms of some of the policy was whether people understood exactly where they were going or what kind of search result they were getting as a result of it, correct? >> yeah, i think broadly speaking that's right. but i think, you know, we have been changing disclosure screens over time. consumer habits on the internet change. people get used to different things. and they end up not liking certain things. and from time to time you have to adapt what you're doing. i think the changes in general we're fine with. we think that, again, we think anything that's good for the consumer is good for our business long-term. and we feel good about where we've ended up. >> greg, can you describe the level of worry internally regarding facebook's graph search? because certainly the day that that was announced your stock was lower.

and i think you could make the argument fairly that brands such as ask.com or urban spoon could be impatted by that new service from facebook. >> look, i think any time facebook makes a big announcement that's news in our space. i think our stock may have been down that day. unfortunately i think our stock was down several days around there. so i don't think, i certainly didn't draw any direct correlation there. >> the market did. >> i certainly think any area where knowing what your friends really want, recommendations, et cetera, is an area that can really be impacted by that. i think urban spoon is that kind of an area. but urban spoon is something that, you know, it's a great app for restaurant recommendations. it's growing fast. i think that, you know, whenever you have these sort of announcements i think you have to take into account sort of the incredible growth in this kind of activity generally, which is still much earlier than later. i think facebook will grab an increasing percentage of that stuff, in the real

recommendation space. especially where your friends really matter. but i don't look at that as really impacting urban spoon that much. and ask, i mean ask is really a reference business. so, ask is generally used, we are trying to find out information that tends to be factual, and i think that, i think that the facebook serve product is going to be a little different emphasis than that. >> why did you recently shut down hatch labs your incubator for mobile apps? >> well, look, i think we tried different ways to start new businesses from time to time. we came to believe that a captive incubator can work at a very large scale where you're putting in lots and lots of money to sort of come up with enough bets that when the winners come through they pay for the losers. i think when we were sort of half in, i think, and we had some good products come out of it, i think we came to a point where we really either had to step up investment meaningfully or sort of approach start-up

investing in a different way and i think that's where we ended up. >> what's going to happen to those assets? i understand you've been exploring several options. >> some of them, the ones that were still in play are being invested in, we took one of them, tinder, which is a dating app and there's another that is an advertising play, still using the funding that we gave it. the existing businesses that were up and running are still very much in play. >> give us an update in terms of growth opportunity, match, we have valentine's day coming up. hope you get some business. but also -- >> we expect to. >> by the way, do you actually get a lot of business around valentine's day? do people use match for that? >> it's a big peak season for that. december, january, february big season. >> separately, an update on about.com which you bought from "the new york times" last year. >> about has been great. we bought about under a thesis that our know-how from ask would translate well.

the business had been in decline. in q4 alone our first quarter of owning it rereversed eight or nine straight quarters of declines and had 35% growth in that asset. we're expecting big growth this year. it really fits in with ask nicely and ask sort of brings it benefits and it brings ask benefits. a real mutual synergies, we feel great about it. >> quick final question. you own the daily beast and "newsweek." it's no longer doing a print edition. what do the prospects look for that as a digital business. do you see that being profitable? >> i think the next twelve months probably not. i think what we said is that we brought back the investment meaningfully. i think this year we'll still be an investment year and we're certainly looking forward to 14, and with the expectation and hope that we'll be turning the corner around. >> 2014. and it can become profitable? this has always been the big question, whether you can turnt a print business with a legacy into a digital business, and whether the digital dollars or rather the analog dollars become

digital coins or not? >> we're going to try and answer that question for you. >> okay. greg, thanks for joining us this morning. really appreciate it. >> thank you, guys. >> what happens in america? do you give each other a gift? or is it just from the guy? or just from the girl? >> on valentine's day? >> what do you do in america for valentine's day? >> hallmark card? isn't this a hallmark holiday? dinner if you're married? >> i'll let you know the day after. >> what kind of like feedback you got from your wife when you didn't give her anything? >> cards. there's usually a card trade and maybe a dinner. if you're married. and then maybe if you're single -- you're trying to work on more than that -- >> on cnbc. >> you should get some big heart shaped balloons. >> there's an idea. okay. >> she can wear that dress. if you have questions or comments -- >> exactly. i need to help myself. >> about anything you see on "squawk box," connect with us online and on mobile.

follow us on twitt twitter @squawkcnbc. like us on facebook and visit our show page squawk.cnbc.com. up next, carlyle group managing director oliver sarkozy is making his way to the set. we'll ask him about european risk, opportunities in equities, and the return of the retail investor. at 1:45, the aflac duck was brought in with multiple lacerations to the wing and a fractured beak. surgery was successful, but he will be in a cast until it is fully healed, possibly several months. so, if the duck isn't able to work, how will he pay for his living expenses? aflac. like his rent and car payments? aflac. what about gas and groceries? aflac. cell phone? aflac, but i doubt he'll be using his phone for quite a while cause like i said, he has a fractured beak. [ male announcer ] send the aflac duck a get-well card

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good morning. let's take a look at what the futures look like at this hour. the implied open is the s&p and dow would open higher. nasdaq just a touch lower this morning. we'll see if we can't push back towards 14,000. we hit that and the rally stalled out a little bit. >> a little bit. our next guest might be able to

talk a little bit about the market. the carlyle group wrapped up its acquisition of tcw group on wednesday. the deal is just one in a recent buying spree for the company and all of our sarkozy's team led this acquisition. there he is. as well as the latest deal to buy investment bank duff and phelps at the end of december. oliver joins us now. he's head of global financial services group at carlisle. >> good morning to you. >> so, you're buying up banks when nobody was touching banks for a long time. what got to you? >> well, neither of these two things are banks. >> that's true. but financial services was sort of a dangerous place to play. >> to play. and with that comes a lot of opportunity and we think we've seized a couple interesting ones in tcw. >> would you play europe right now? >> europe is going to be full of opportunities. structural changes that are taking place there clearly for

folks like us is land of opportunity. but with that will also come some issues. you've got a banking system that needs to dramatically delever. we estimate about 30 trillion dollars of assets needs to move off the books of those banks. and as that happens there will be opportunities for investors. >> opportunity is a great word, right? but it's very broad and encompasses a lot of things. narrow it down for us in terms of there could be opportunities in europe. where geographically? which sector specifically? >> it really depends on what your investment parameters are. what is clear is that the cost of capital for europian firms is going to increase. and with that will come some disruptions, as you move lending off of the books of the banking system onto the broader market. >> as expected the ecb has left rates unchanged. get your reaction to that.

is that the right -- >> he got the phone call in advance. he said unchanged. it was on the bottom of the screen. >> is that the right move, though? >> yeah, i think so. i mean, look, europe needs stimulus, and in order to make that happen, you need to have a flexible monetary policy. >> doesn't europe need a weaker your row? >> europe needs a weaker euro in my view. >> politicians up in arms about the fact that the euro is being so strong recently? we're just doing a segment on currencies earlier on today. i think it's up 7%. i don't know. so it's up about 20% against the yen, for example? i don't know how much it's up against the dollar over the last three months. but it's strong. >> and you can question why that is, but certainly as an export economy, germany would benefit from a weaker historical factors that make them cautious about policy that would cause that to happen. so this is going to be one of the major debates, i think, going forward. >> is draghi afraid to cut rates

now because he's holding it back in his pollster in case he really needs it if the situation worsens beyond what he expects? i think there's a bit of that. i think the central bank in europe is generally been more conservative. in implementing policy. and so taking a more cautious approach doesn't surprise me. but certainly they'll have dry powder that we don't. i don't know if you heard -- >> you guys are in a different place than this, though. a little bit? >> no, i'm not sure i disagree at all with what he had to say. >> the yes about the euro and the yen, a lot of that comes from the fed. basically these easy policies make it more difficult for these other central banks. so it's actually, i am always concerned that this currency war people keep talking about is actually -- do you think the

europe is doing -- >> ecb? they are doing a good job. one factor they've committed this sovereign debt purchase. that's made a big difference in europe. so i think you've got a lot on his mind >> i want to back up to what you were saying about a currency war coming. already we're in the middle of a currency war of words. but what exactly do you mean by a currency war. how would that manifest itself? >> usually happens when central bank is very easy, and other central bank sees their currencies too high so they'll be easing, too. we actually have seen it for a few years. a lot of central banks hold their rates lower, whether it's mexico, scandinavian countries, because of the fed and ecb rates lower. so that's kind of what causes this currency war. >> how does that end up? kind of like a mexico standoff? >> it's about when people have a more global view of policy. take this into account. i've been urging for years that you've got to take into account the fact that there's spill

overs in monetary policy. it's good for countries to take that into account. >> when people are trying to fight fires, if you like and you've got economies that are desperately trying to boost themselves like japan and i guess the u.s., you could also add has been manipulating its currency to the downside as well. >> people realize it becomes counterproductive and they make the adjustments. we had a long period of time where central banks didn't do that. '80s and '90s. >> oliver, you're a buyout guy. we just had a big deal in the buyout space. not a financial deal, but dell. >> right. >> i actually think it was a financial deal. microsoft turned itself into a bank by lending some of the money. how big a deal do you think could be done in the private equity space right now? >> well, that one certainly caught me by surprise. it was larger than i would have extented. having said that the debt markets right now in large part because of some of the issues we've been discussing are incredibly accommodative. and with that comes greater

buying power than one would have imagined so it's really a question of how stable and predictable the cash flow stream is. >> you got something in the happener? >> we are always busy. >> i good year for m&a? >> i think so. certainly for m&a in the buyout world. whether the corporate world follows suit depends on a bunch of different factors. for people like us the debt markets will likely keep us busy. >> just quickly i understand you're more positive on the liquidity market than you have been in some time. even as multiyear highs, nearing record highs in the u.s. or are you talking globally? >> here in the u.s. you have a disconnect between what the bond markets are telling you and what the equity markets are telling you. if the bond markets are right, equities have a long way to run. >> oliver, thank you for being here. >> nice to see you. >> coming up we've got more -- >> happy valentine's day. >> treat your lady right. coming up, we've got more with our stanford economics professor

john taylor. coming up at the top of the hour, a "squawk box" exclusive interview with robert rubin. former treasury secretary of the united states. we'll talk about the path from debt disaster to economic prosperity. keep watching "squawk box" on cnbc. [ male announcer ] any technology not moving forward is moving backward. [ engine turns over, tires squeal ] and you'll find advanced safety technology like an available heads-up display on the 2013 lexus gs. there's no going back.

time now to get some final

thoughts from our guest host john taylor. you make the case that the fed, by its easy money actions, is hurting the economy. there are those who would say, show me the evidence. where is the evidence of that? right? housing has started to come back. would it have come back without the actions of the fed? and then other areas of the economy that have at least shown some signs of life. >> think about it this way. two years ago the fed was forecasting growth and 2012 was going to be 4%. turned out to be 1.5%. they rolled out all these policies. so things have gotten much worse than they thought. what are the reasons? europe. i don't think so. policies is a mess in many respects. fiscal policiepolicies. we don't have a budget. you wrap all those things together you see a drag on the economy. monetary policy is part of that. >> if washington had not screwed up the fiscal cliff, i mean that was an embarrassment, okay? you had ceos who were holding

back in the way they were investing, the way they were spending, the way they were hiring. >> absolutely. >> wouldn't that have helped the economy be better than it was otherwise? >> absolutely. all this policy uncertainty. they're sitting on huge amounts of cash, banks are sitting on huge amounts of cash. policy uncertainty has been a really a problem for the last two or three years, at least. >> and will continue. >> the cliff is just an example of that. >> we have some big battles to come on that front. >> absolutely. one coming up in just a few weeks in the budget. >> how does it transpire? >> what i'm hoping is that they have this sequester, which is just adross the board. if they translate that into decisions that could be made across the board. but we do have to get spending under control. still rising very rapidly. that's really what the problem is in terms of the deficit. we have this debt that's still exploding, part of the policy uncertainty. the more we can -- >> i think my point also is, wouldn't we be seeing more signs

that whatever the fed has done, may have been working better had washington not shot us all in the foot? >> i think it's -- i think it's the whole policy package to the. the fed has been very interventionist if you like. they're trying to do a good job, i think it's not helping. but also we've had the stimulus packages, a whole wide range of things like this which has been a drag. >> we have to leave it there. thank you so much for joining us this morning. it's been a pleasure. >> a lot of fun. >> thank you. >> come back. >> next time you'll have kernen -- he won't give you a hard time. >> not as bad as you. >> coming up, two very big interviews that you can only see right here on "squawk." former treasury secretary robert rubin. he's in the green room now. he's going to join us on the "squawk" set. we'll talk about the economy, big banks and america's debt crisis. and later chicago fed president charles evans is going to join us live from chicago. we've got a very special hour of "squawk box" starting in just two minutes. come on, nowadays lots of people go by themselves.

no they don't. hey son. have fun tonight. ♪ ♪ back against the wall ♪ ain't nothin to me ♪ ain't nothin to me [ crowd murmurs ] hey! ♪ [ howls ] ♪

this hour on "squawk box," an exclusive interview with former treasury secretary robert rubin. we'll ask him how to restore the american economy, and avoid a catastrophic debt crisis.

plus, chicago fed president charlie evans, on the path to higher employment, and stronger economic growth. a very special hour of "squawk box" begins, right now. >> welcome back to "squawk box." a very special hour of "squawk" here on krcht nbc. i'm andrew ross sorkin along with mandy drury and scott wopner. joe and becky have the day off. they'll be joining us tomorrow from pebble beach. with me on set, robert rube rn, former treasury secretary of the united states. plus we're going to be talking to chicago fed president charlie evans later in the hour. first mandy and scott will get you caught up on the morning headlines. >> hello, everybody. among the stories we are following this morning the bank of england leaving its key interest rate unchanged at half a percent. the european central bank also leaving its key rate unchanged.

both decisions were as expected. back here in the united states, we are less than half an hour away from breaking economic data. economists expect weekly jobless claims to drop to 360,000 from 368,000 the previous week. we'll also get productivity numbers, economists expect a decrease of 1.6% for the fourth quarter. >> all right, mandy. boeing reportedly working on battery design changes that would minimize fire risks on the grounded 787 dreamliner. "the wall street journal" says the company could have the passenger jet flying again as soon as march. american airlines parent amr and us airways are said to be hashing out the last major details of a merger agreement. the deal would create the world's largest airline by traffic. the all-stock deal would be executed as a reorganization plan that takes american out of chapter 11 bankruptcy protection. and a filing offering more details on the dell buyout. founder michael dell and his investment firm handing over

$750 million in cash towards the $24.4 billion deal. the company also says it is targeting the repatriation of 7.4 billion of cash now parked abroad to help finance the transaction. mandy? >> okay, scottie. let's take a look at what the markets are up to right now u.s. equity futures pretty flat right now. earlier on they were a little more positive. the implied open is looking flat and mixed. as for what's happening overseas in asia, hang seng slightly lower along with the shanghai composite. the japanese nikkei also lower. i should add the nikkei 225 really had quite the comeback recently. and even shanghai this december has had a comeback of its own. in europe, the ftse is slightly lower. the cac quarante and the germany dax also moving slightly higher. andrew now with our big interview of the morning. andrew? >> thank you, mandy. we have an extremely rare and exclusive interview with one of the most influential figures from washington to wall street over the past 20 years, joining us now on the set, robert rubin, the former u.s. treasury

secretary and co-chairman of the council on foreign relations. he's also a speaker, or was a speaker at the cnbc institution -- institutional investor delivering alpha conference as well as an adviser to centerview partners. we just had blair effron on the show yesterday. >> i know that. >> good to see you. i wanted to put this up. this is what's on the cover of "usa today." pentagon warns of huge cuts. when you think about what's going on in washington, right now, and you think about the sequester that may or may not happen, and you think about your history in washington, do you think that we will have the sequester? >> andrew, i don't know. i think it's a very complicated situation. i think we had a great opportunity and i actually thought there was some reasonable chance it might happen, which was to have a grand bargain that could have addressed what is really unsustainable and deeply dangerous long-term fiscal situation and i think if we had done that, not only would be useful for the long run but i think could have generated confidence in the shorter run

and promote jobs now. now instead of that we have a happen has 5rd process. a sequester we're facing. it's a terrible piece of legislation. it arbitrarily cuts defense and nondefense without thoughtfully doing so. instead of being phased in so we'd have more room for recovery, it hits abruptly. and it's far, far from clear that if it's put in place it's going to stick. so in all respects it's a terrible piece of legislation. will it take place? the politics around this are so complicated and both parties would want it not to happen, they want it not to happen for different reasons. i will say, as you know, the sequester is an authorization measure. so on march 1st, if it still is player it authorizes the reduction of spending but it doesn't actually implement it. the implementation would be at the time of the continuing resolution, which is march 27th. >> you talked about a grand bargain. and the fact that we didn't have one. and that you're worried. who do you blame for the fact that we haven't got a grand

bargain? >> when president obama came out with his proposed plan, which was a plan in response to the fiscal cliff, it was in my judgment a very sound plan, financed by revenues and spending and going to be phased and had public investment. i think it was a very good plan. clearly, the republicans in the house weren't going to accept the totality of that plan. and what he said is you will remember when he announced it, this is what i believe in, but i'm prepared to compromise. and the congress never engaged with him in the process of compromise. our democracy cannot work without the willingness to compromise. so i would say it was the house not engaging. >> do you think washington's a different place than when you were there? >> it is very different, andrew. i had dinner about two or three months ago with walter mondale who i really do know very well and he described what washington was like when he was a senator and he said we had partisanship, all of the kinds of stress that you have today. but, he said, at the end of the

day, most of the members of the senate were committed to governing so they could work together. he said a lot of things were accomplished on a bipartisan basis. by the time we got there, it had already deteriorated substantially. our first deficit reduction program was adopted entirely with democratic votes but what's interesting was after that, there were a fair number of important measures that had bipartisan support. today, there's virtually no bipartisan activity unless it's in response to a crisis or very special circumstances. >> people often talk about presidential leadership and compare president obama and they compare president clinton. and the suggestion is that president obama has not been able to lead the same way, not been able to cross the aisle. do you think that's right? >> i think that president clinton was effective in crossing the aisle. and i think president obama would have been every bit as effective, but i think he faced a very different political situation. by the time you got from the '90s when we were there to the present time the polarization had hardened very substantially

and i think had president obama faced the same political situation that president clinton had it would have been very difficult, just as it was very difficult for president clinton, but i think obama in a different style, in his own way, would have been equally effective working with the opposition. >> we have lots of ceos who came on the set before the election who said that president obama was not pro-business. he was not pro-growth. he was not -- you've heard it. you've heard it a lot. do you believe that? having lived in washington. what's your take on that issue? >> my take is as follows. if you take a yellow pad, andrew, and you write down what president obama has done, he dealt effectively with the crisis, the financial crisis that was the worst we've had in 80 years. he then moved forward in a number of steps tried to put out or did put out budgets that made sense but congress wouldn't engage. now you come down to the present moment where as i said a moment ago he put out what i think was an effective and serious debt

reduction program. >> when it comes to entitlements there is an argument to be made that it didn't go far enough. >> just to finish that thought and i'll get back to you thought. i think that his policies and i'd include the health care program in this by the way, that's obviously controversial and remains to be seen. my instinct is to see if the cost measure works. i would say his policies have been centrist and effective. if you look at the economic teams he put in place, both in the first term and the second term, they were fundamentally pragmatic centrist people. if you look forward from here, i think the key is to stay on the track that he's been on and then for congress to engage. >> what do you say to all of your friends in the business community who i imagine you're having this conversation with them all the time and they're saying, i hate this guy? >> it's an interest being phenomenon. what i say to them is part of what i just said to you plus one other thing. i say take a yellow pat. think of where we were. we were on the ink of an abyss. they put in place under tim the guy near's leadership, a

response to the financial crisis and you will remember this, andrew, they got tremendous pressure from the left and the right to abandon that program. tim and the president stayed with it. and it turned out to be very successful. so i think that he is -- and then he had a stimulus, you can argue about its content, but we're in a political world. but i think the fact of having a stimulus was right and i think the amount was about right. >> where are we in the economy -- >> i think the reason for the phenomenon you just mentioned is there is a real, almost ships passing in the night. and this has been true ever since i've been involved with these kind of things, business really needs to better understand the very different set of issues and dynamics that washington faces and conversely washington needs to understand business better. and i think that would be very helpful in both policy formulation, and also in creating confidence. >> where are we on the economy right now? you're looking at a market that has gone up pretty considerably and i know you as a professional warrior of some sort so i'm just sort of wondering whether you're worrying about where we are both in the markets and from an

economic perspective. >> leave the markets aside for a moment. because i believe markets are psychological phenomena in the short run. i believe in the long run they reflect fundamentals. they can easily move substantially away in either direction. from the fundamentals. some of the fundamentals where the economy is, i think we face enormously strong head winds. there have been some positives. housing is better. but if you really dive into it, even though it's better, it's a very small percentage of the economy. because it is coming off such a low base. so the bottom line of what i think, i think if we look at all the various sources of demand, what you see in all of them are very strong headwinds, and particularly the fiscal drag we're going to have, so i think the recovery is going to remain slow and gradual -- >> slower than we think right now? >> depends who thinks. slower than who thinks. i think it's slower than a lot of the more affirmative analysts have thought. want to put a number on it? >> yeah. >> i'm not an analyst arriving

at a number. but if you want a number that kind of reflents the idea that i'm describing, i would say probably somewhere in the number people have, which is a 2% kind of number, with some -- >> but that's sort of in there with everybody else. that's not -- >> there are -- it's in there with a lot of other people. i guess i would think that there's at least some chance it could be lower. some chance could be higher. there are a fair numb bev of analysts who think it will start off on a relatively slow pace. then it will pick up, they're quite a bit higher by the time you get to the end of the year. that may be. but to me it still seems with all the head winds we're going to have it's going to remain in the slow recovery. >> are you worried about europe, still? >> i think that europe is very different than most people think it is. i think there's a complacency about europe that is probably a product largely of, you'll remember this. the announcements mario draghi made. i think he's an outstanding leader. in fairness, he's a very good

friend. i think he's an outstanding leader. he made an announcement on a thursday, that he was going to do what was need and the markets reacted positively. he subsequently wisely said the ecb was only going to act if conditionality was met so the politicians would do what they need to do. i think there's been a very substantial complacency in europe and i think the risks are considerably higher than people think. and i'll just add one more point. a lot of europeans will say a lot's been accomplished over the past year. what i think is that the european leaders have been behind the curve from the very beginning and if you look at the facts now, in the troubled countries, the banking systems, nobody knows what the numbers are. growth is still negative and the output gaps are greater and the debt-to-gdp ratios are greater. i think europe is far more troubled. >> more tail risk? i was just in davos. they said tail risk is off the table. mario draghi said it's over, don't worry about it. >> there is a complacency -- i think mario draghi who i think is outstanding has a role to

play. but i was not at davos, but people tell me that there was this sort of attitude you've just described and i've heard people there describe it as complacency. i would describe it as complacency and i think it's a function of a misreading of what the ecb's action could actually mean. >> okay. we're going to slip in a quick break. we have a lot to talk about. what to talk about jack lew, wall street, banks, regulation a whole lot more. we're going to come back and get more from former treasury secretary bob reuben. still to come we have cnbc's exclusive interview with chicago fed president charlie evans at 8:40 a.m. eastern. stick around. we're coming right back. [ male announcer ] at northern trust, we understand

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welcome back to "squawk box." want you to watch shares of target today. the retailer says january same-store sales rose 3.1%. the street was only looking for an increase of 1.7%. right now let's get back to andrew and mr. rube rn. rubin. >> our special guest has been former treasury secretary bob rubin. last summer his former boss made some big news talking about breaking up the banks. take a listen.

>> i think what we should probably do is go and split up investment banking from banking. have banks be deposit takers. have banks make commercial loans and real estate loans. and have banks do something that's not going to risk the taxpayer dollars that's not going to be too big to fail. >> bob, i want to get your reaction to that. i don't think anyone's had an opportunity to ask you publicly about sandy's comments. obviously some people have argued that you pushed in your role when you were treasury secretary for less regulation that allowed the creation of some of these big banks. >> well two parts to that, andrew. one is that with respect to the deal itself, in a series of interpretations that began in the late '80s, it had been basically eviscerated in terms of the big banks. by the time you got to the time

glass steagall there was nothing left in terms of its restrictions. that's been widely reported including in one of your columns. >> i did write about that. >> you did. >> but on the larger picture -- >> the larger picture is the really interesting question. i think the following and i've given a lot of thought to this and lived with this issue for a long time, way before i've ever got to washington, too big to fail is an enormously important question. came up in 1990 when a group of banks were in difficulty. i think it's an enormously important question. i think the problem is, that if you look at what sandy had to say and i have a lot of respect for sandy, but i think that if you followed sandy's path and you broke up the banks in some fashion or other, as he's describing, the risk isn't going to go away. the systemic risk, the too big to fail risk will move from one place to another place. for example, if you could curtail what the banks can do in terms of trading, it isn't that the trading is going to go away. you have a large global economy that needs those activities but they'll go to other platforms. i think the real question is,

are there ways to deal with the risk? and there's dodd-frank on the totality, there's basel iii. it's interesting, basel iii which are higher capital requ e requirements, regulators are backing off because they're afraid they're going to restrict lending. tim geithner probably had the best answer at all when he said the answer to systemic risk which is what you're talking about, too big to fail, is capital, capital, capital. the problem is, as basel iii people are finding right now, when you increase your capital requi requirements beyond a certain point you limit lending. >> so when you watch that and saw sandy say that why do you think he's said that? john reed has said that and paul volcker and many people who you spend time with. >> are you asking me why -- >> what do you think is -- >> well, paul volcker actually said something slightly different as you know. he has advocated the volcker rule, and i don't know the volcker rule, what it means, because nobody's defined it yet. and the reason, as you know, is

that it is a very -- it is a line that will only be ultimately arbitrary. so, it's an issue that a lot of people engage with. i'll stick with what i said a moment ago. the focus is right. >> right. >> the focus of too big to fail is right. we had fannie mae and freddie mac. the question of how to address it i think is massively more complicated than these kinds of relatively in my opinion, limited proposals. >> right. >> i'll just say once again, i think it's really important, if you're going to get into this question of too big to fail, you have to try to figure out, if i take the risk away from here, where is that risk going to go and how do i deal with that? and i don't think anybody's come up with a good answer to that. >> let me ask you this, because you haven't been on squawk in many, many years, probably since you were treasury secretary i think, and there are members of the audience we had sent some tweets out earlier and they said you got to ask him about his role in citigroup. i know you've answered some of

these questions before. let me ask, do you feel any responsibility for what happened to citi? >> i think with respect to citi and more broadly, i think this is a question of the financial crisis, not just with me but very large numbers of people, i'd studied and dealt with -- dealt with on a very practical way, andrew, tail risk. tail risk which is the low probability of an enormous effect. really my entire professional life. i was worried about excesses before the crisis began. but what i didn't see and virtually nobody saw, regulators, analysts with all due respect to journalists, was the possibility of a serious crisis. turned out to be the worst crisis in about 80 years. i wish i had seen it. i regret not having seen it. and i would suspect or would guess that there are very large numbers, vast numbers of other people who have the same view. that is to say, who also regret not having seen it. having said that i think system reacted in the right way, which is to say, even though virtually nobody saw this, now that it's happened we've got to try to figure out how to minimize the

probability of it happening again. >> i want to talk briefly about jack lew, who is going to be up for his confirmation hearing next wednesday. you know jack lew. you helped him get a job or recommended him at citigroup. what do you know about him? what do you like about him? what don't you like about him? >> i knew jack when he was back at the head of omb. i think he was a very good choice. jack is a very -- it was interesting when he was at omb. jack is a very open-minded person. he's smart. he listens. engages -- >> does he know enough about the markets? you knew about the markets. hank paulson knew about the markets. if we have another crisis is he the right guy? >> i think the answer is yes. but let me expand on that if i may. treasury is a very, very broad -- has a very broad agenda, if you will. a very broad range of engagements. and i found when i got there that the range of issues that treasury is involved with is much, much more than i realized. no secretary is going to be fully conversed in all the issues you have to deal with. where the key lies, i think, is

being open-minded, engaging with people who are expert in the areas that you have to deal with, and then being able to listen to, and parse through what you're being told to make a good judgment. that's what the director of omb does as well. i got to know jack very well in that role. and i think that he was very effective in doing everything i've just said and i think he has very good judgment. the other quality he has which is very important at treasury, as well, is he dealt very well with other cabinet members, and with the hill. and that's an important -- and that's a very important part of the treasury job, and he'll now have to expand that and will expand, i have no doubt, effectively to deal with finance ministers around the world. >> score for me, if you will, tim geithner, who you just brought on board i think. i imagine you had a real in it back to cfr, to the council on foreign relations and i know you're a long time friend of his and you know each other very well and you talk to him frequently. there has been criticism that he ultimately throughout his tenure was too close to the banks. do you think that's a fair criticism?

>> i think, andrew, i think tim was the hero of the response to the financial crisis. we had a financial crisis that really took us to the abyss. what tim did was to develop this idea of stress tests and getting out of capital into the banks. as you will well remember, i think i've said this before, as you well remember, he was attacked from the left and from the right. they both wanted to go in different directions. tim had the courage to stay with a program that was very uncertain at the time. president obama had the courage to back him. and it turned out to be successful. in comparison, if i may say so, with what the europeans have done with their banks, where nobody knows what the numbers are, they apply a stress test that was meaningless and here we are some number of years later, they were still, and rightly so, enormous questions about many of the european banks. i think tim has done an excellent job. >> do you push for enough regulation? people look at compensation on wall street and say it's still too much. >> well i don't think that compensation was the purview of tim. you could argue about compensation one way or another

and argue what role it played. that's an issue that the policy community is going to have to deal with going forward. but, it wasn't central to what he had to do. >> do you think compensation played a role? obviously the other critique on you has been that you were paid a huge amount of money, $100 million plus. no one's ever asked me and i was wondering if i could, did you get to keep all that money? a lot of it was in stock. >> the part that was stock, stock went way down. >> did you get to sell any beforehand? >> i never sold. i could have but i didn't. the only stock i sold was the stock to pay my taxes that were due on the receipt of stock. compensation broadly, i think the key -- i may be wrong about this. but i don't think compensation was nearly as central to the crisis as a lot of people think. i think what probably did play a role in the crisis was the fant that these companies were public. i think because they were public there was tremendous pressure on all concerned, true throughout the industry, every one of them,

to provide quarterly earnings. it's interesting, andrew. that problem of the quarterly focus goes way beyond this crisis and way beyond the financial industry. i think it really distorts company management throughout our economy, because instead of focusing on long-term strategy is very often is on trying to produce the next quarteraries earnings. >> i'm told we're going to have to go. this has been fantastic. i have one final question for you. hillary clinton, you think she's going to run 2016? >> i have no idea if hillary is going to run or not. if she did i think she'd be an outstanding candidate and president. but i have no idea. >> if she doesn't, is joe biden your guy? >> i don't have a guy. i think that there were -- actually i do think there are a number of very good people. the party will be very well served -- would be very well served by any one of a goodly number of people. and i think much more importantly, there are massively important issues about the role of government, the public investment that we need to have,

fiscal restraint. reform and education and energy and so much else. who the next president is is very important. i think there are a number of very good democrats to carry that. >> carry the torch? okay. bob rubin, thank you for being here this morning. >> you're more than welcome. >> come on back. we've got to do this more frequently. >> okay. >> i've got to try. coming up we have breaking economic data around the corner. closely watched weekly jobless claims and fourth quarter productivity numbers at 8:30 eastern. ♪ [ indistinct shouting ] [ male announcer ] time and sales data. split-second stats. [ indistinct shouting ] ♪ it's so close to the options floor... [ indistinct shouting, bell dinging ] ...you'll bust your brain box. ♪ all on thinkorswim from td ameritrade. ♪ no they don't. hey son.

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welcome back to "squawk box." we have data coming out, fourth quarter preliminary nonfarm productivity and unit labor costs. productivity deteriorated. down 2%. we're expecting about down 1.5%. our last look, though, was ramped up a bit from 2.9 to 3.2. and you know, labor costs usually rise when productivity goes down. it didn't disappoint in that regard. 4.5. 4.5% increase. we're looking for about 30% less than that. and last month, we did see a drop just like the revision positive in productivity from down 1.9 to down 2.3. jobless claims. revised 371, moves down 5,000 to

366,000. so originally released to 368. that 3406ed up to 371 and then we subtract 5,000 arrive at this week's 366,000. we had an upward revision to continuing claims which is on a different time line. last week it was just shy of 3.215 million ramped up a bit to 3.224. let's not get lost in the inush yeah. hovering below 400,000. we're not below 350 although some record areas were. we continue to monitor how all of that feeds into improving but not gaining momentum jobs. the ecb is talking a bit. the euro currency rebounded. of course we want to continue to tune in to this press conference. no rates were changed. nothing hugely significant. the dollar did lose a little bit of ground against the pound, as well. remember the mnc, that's the

policy committee bank of england met this morning. >> all right, rick, thanks so much. rick santelli with those numbers this morning. you want to check out shares of apple. >> david einhorn's green light capital is sending out a letter suggesting that shareholders oppose one of the major votes that's going to come up during this proxy season at apple later this year. more details on what this all means. he's suggesting they vote against a proposal in the proxy which would eliminate preferred stock. this would actually keep them from being able to issue that stock without shareholder approval and i believe, if we've done all our homework we're going to have david einhorn on the telephone in just a little bit to talk all about this. >> this comes on the heels of yesterday. there was some speculative talk swirling around, right, that

apple would buy back its stock and raise its dividends. >> and that stock, of course, has fallen -- >> that stock has obviously fallen and david einhorn has been a big proponent of that stock. i imagine he's been in it for a long time now. >> they're still long. >> still long. >> we'll ask him by the way, whether he took any profits throughout because he's been in this for quite awhile. it was one of their biggest holdings. he is a big shareholder in apple, has a lot vested in all of this. >> incredible chart. clearly in september it peaked out about $700 a share. look how far it has fallen and seen almost a complete free-fall i guess you could say a straight trudge downward to $460 a share. >> do you have a gut feeling, andrew, as to why he would urge such a thing? >> why he does it now? i don't know. i imagine he has to do it now because this is coming up in april? >> shareholder meeting is coming up soon. what's interesting, also, is that apple and tim cook's going to speak next week in san francisco.

>> right. >> at the goldman sachs tech conference. >> unless he's worried that they're going to start issues -- that's something that they could do. we will try to talk to david probably in just about 15 minutes. we're working on that. >> okay. >> coming up, another "squawk" newsmaker. chicago fed president charlie evans will join us next to talk jobs, the economy, and the fed's next moves. tomorrow a special edition of "squawk box." live from pebble beach. former yahoo! ceo carol bartz will be our guest host. we'll talk to at&t chairman and ceo randall stevenson. plus, the legendary clint eastwood. >> people have to get creative when the pressure is on. >> it all starts tomorrow at 6:00 a.m. eastern. may not be with fidelity, but we can still help you see your big picture. with the fidelity guided portfolio summary, you choose which accounts to track and use fidelity's analytics to spot trends, gain insights, and figure out what you want to do next.

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welcome back to "squawk box," everybody. let's go straight to chicago where steve liesman, i believe, steve, you are joined by a very special guest. >> yes, mandy, thanks very much. i'm here with chicago fed president charlie evans. charlie, thanks for joining us. >> thanks for being here. >> so you sort of started a revolution in central banking about a year or so ago when you started talking about economic targets. the federal reserve is using it. they're talking about using it in england. they started to use it more in japan. are you satisfied with the way the federal reserve has implemented so far? >> i think we have pretty appropriate policies in place right now. i think that moving into economic conditionality, clear conditionality, as to how long our policies will be in place. the one thing we really want to

make sure everybody understands is monetary policy will continue to be accommodative until things improve substantially, and we get out of this slow growth economy. so i'm extremely pleased with where we are. >> when you say clear, there are some who say it's anything but. it's clear when it comes to raising interest rates. but some argue that it's not clear when it comes to quantitative easing. you're using this phrase substantial improvement in the labor market. is that clear to you? >> it's qualitative. i tend to favor quantitative markets. i think that's sufficient. we're out for a run, we're not going to run a marathon. it's about a half marathon. and we're going to see how it feels when we're done. so we're going to keep policy low until the unemployment rate is 6.5%. if we still feel good, you know, with the run, we might go a little bit longer. we'd like to get off to a good start. we're loading with carbs, taking the energy bars, we're going to get this off so the first couple of miles is at a good pace that continues like that. so the quantitative easing is to

get it started. we're going to do that until we're clear that the labor market outlook has improved. might be happier, might be a whole year, could be longer. i'm hospital mystic that momentum is going to pick up this year. >> let's talk about what substantial improvement looks like. the last time we met back in october you talked about job growth of 200,000 per month over a six-month period. is that your metric for substantial improvement? >> i think that's a good bench mark. i think that's completely achievable. the last three months have averaged 200,000 on payrolls. we need month after month of 200,000. i'd say, for six months, that would be good. but we also need growth above potential that reinforces that labor market improvement. and we need to really see the unemployment rate turn in its direction. it picked up a little bit to 7.9%. we ought to see it moving down. >> this is really the key, the unemployment rate. there's different things that are effecting the unemployment rate. you have the participation rate. the percentage of those in the

workforce who are actually -- population and part of the workforce, that seems to be going down. part of that is because of aging. part of it -- how do you think about the unemployment rate? could you imagine 200 or 300,000 jobs a month but increasing unemployment rate and would that cause you to dial back on stimulus? >> i think the unemployment rate came down a little more quickly in the last year than we had thought. i think once we start getting growth above trend, clearly above trend, quarter after quarter, the unemployment rate is going to move down, people will be coming back into the labor force but they'll be finding jobs and things will be picking up. so once we get momentum, and we achieve escape velocity either later this year or 2014, i think unemployment will move down with momentum. >> do you have a time period where you think we get to, say 7% unemployment? >> well, i've got an outlook, and you know, that outlook has the unemployment rate in the range that you talk about by the end of 2014. in the 7% vicinity.

i kind of currently think that 6.5% unemployment isn't going to be achieved until about the middle of 2015. but if things pick up more quickly, you know, that data will appear sooner. >> we have to talk about the difference between when the fed starts raising interest rates, and when it stops quantitative easing. the st. louis fed president says it's about 7%. do you have a point in your mind when the unemployment rate should trigger the end of quantitative easing? >> these are hard questions. >> that's why we ask them. >> thank you. and we have chosen to take a qualitative viewpoint on this. i've said 200,000 on payroll. that's what i'm looking at. i'd love to see 7% unemployment sooner, rather than later. and moving down. to 7%. i tend to think it might be possible to turn off the quantitative easing. we build moment up and then we're just going to keep going. it's self-sustaining. we wouldn't have to continue to carve up along the run and so that's why we might be able to

stop before 7%. but i'm open-minded, and i think that these policies have done a lot of good, auto sales are up. housing is turning the quarter. i think our policies are improving things. >> how much -- running out of time. how much fiscal restraint do you expect to see? go well, that's marked down our forecast. i'm looking for 2.5% growth this year. that's against 1% drag under the current law for fiscal policy, if we had more of a drag this year, that's more of a headwind that might mean that we have to do a little bit more. but i think we've got the appropriate policies in place to respond flexibly to what we're facing. >> you're going to sit right there. we're going to go back to the "squawk box" show. there's a lot of news happening this morning between bob rubin and some other special guests there. and charlie is going to answer some more questions. we're going to bring you those other questions, those other answers in the 10:00 hour, then again in the 1:00 hour. and all of it, of course, online. back to you guys in new york. >> all right, steve, great stuff. thank you so much. so many newsmakers this morning. and coming up, more on the apple news we just told you about a

few minutes ago. we're actually going to speak to david einhorn next. you certainly do not want to miss that. also don't miss a special edition of "squawk" tomorrow morning, when becky and joe are out in beautiful pebble beach with some very special guests. including at&t chairman and ceo randall stephenson. former yahoo! ceo carol bartz and clint eastwood, as well. that's going to be a very special show.

welcome back to "squawk." want to show you the futures. mixed picture right now of the implied open, slightly lower for the dow. a little bit higher for the s&p, and the nasdaq. number of economic stats hitting the tape this morning. fourth quarter productivity falling 2%. labor costs rising 4.5%. the fourth quarter productivity drop is the largest since the first quarter of 2011. weekly jobless claims falling 5,000 to 366,000. and out of europe this morning, the ecb and boe both leaving interest rates as expected unchanged. >> okay. we have a very special interview. joining us now on the "squawk" newsline is david einhorn who just made some news about 15 minutes ago regarding apple. david, good to have you on the show. >> good morning, andrew. >> if you could, because it's complicated and technical and i should also tell you that apple

stock is moving on this press release and letter that you've sent out urging shareholders to vote against the company's proposal to eliminate preferred shares. why don't you give a little bit of history to explain what this means, why apple was trying to do this, and what you think could happen. >> excellent. let me tell you what i think is going on here. apple is a phenomenal company, filled with talented people creating iconic products, that consumers around the world love. apple has a problem, we think, which is it has a cash problem. it has sort of a mentality of a depression. in other words people who have gone through trauma -- and able has gone through a couple traumas in its history, they sometimes feel like they could never have enough cash. i remember my grandma roz, she was a depression era woman from her chilood, and she wouldn't even leave me a message on my

answering machine so i could call her back because she didn't want to get charged for the phone call. and that's kind of the way people's attitudes sometimes are once they've been through this. so we've been thinking about tplt the companye a very large cash forward. they want to have it in case bad things happen. they want to have it so that they can be strategic. they want to have it so that they can do acquisitions if they want to do it. and this has been building up to a large number, over quite some time. and what we thought about was we came up with what we think is a solution, where apple can maintain its cash, and its strategic flexibility, and its comfort money, and its war chest, and at the same time, shareholders can receive the value that is embedded within the balance sheet. and the way that this would happen would be, if apple distributed, not sold, but distributed to existing shareholders high yielding preferred stock. and they could do this in some

size. apple is a phenomenal credit -- >> david, you went to them, from my understanding of this, you went to apple and suggested this, not only did they say no, they now appear to be trying to eliminate this possibility by taking it off the ballot for this proxy season. >> right. so let's talk about both halves of it. we think that apple's a terrific credit. and people who would own this preferred would be happy to have it at about a 4% yield plus or minus. something in that ball park. when we went to apple, we suggested this idea, they went to their advisers, and their advisers came back and said geez, it will probably be about an 8% yield which makes the idea not all that attractive. that's something that we agree to disagree about. long-term microsoft yond bonds yield under 4%. we think apple is an even better credit than that. here we're looking at just start with $50 billion, which would be $2 billion of dividends. which, you know, apple has $140 billion of cash on the balance sheet so they could pay 70 years

of dividends right out of the balance sheet. >> why not buybacks, david? >> oh, this is better. this is way better because this doesn't actually require them to use any of the cash right away. they'd be able away. they have been able to maintain their cash in all of their strategic ideas and at the same time, shareholders would be rewarded with something that gives them credit for apple's phenomenal balance sheet and franchise value. >> why not hike the dividend, as was the speculation just yesterday, david? >> it's really, again, the same issue. the dividend gets capitalized in with the earnings in a common equity security and the common equity security is a secure that has the volatility related to the earnings. in today's environment, there's a tremendous demand for high-quality, cash flow incomes for individuals, for institutions, for pensions, for insurance companies. so we think that if they distributed preferred stock with say a 4% yield there would be enormous demand. share holders that want that

stable income could keep it and shareholders that want to own apple for the upside within the operations would continue to simply own the common and they would get a -- be able to take a lot of money off the table by selling the preferred to institutions that want it. >> you are long apple, right? is this all you think they need to do to get this stock moving again. this is a stock that has had quite a fall since its peak back in september? >> very simply put, we think for every 50 billion of prefer they had issue, it would unlock about $32 a share in apple. if apple used about half of their earnings toward this program, we think they would be able to issue approximately $500 billion, which would unlock about $320 per share and that assumes that the pe multiple doesn't expand. >> david, just to nail it down what is your position on apple right now so the viewers understand? >> we are long. >> you're long? you have been long a long time now? >> we have owned apple since

2010. >> have you sold in between, taken any profits? >> there's been a little bit of trading but we own -- we own more apple today than we ever have before. >> david, let me switch attention quickly to another stock that you have a relationship or had a relationship with, that being herbalife, which you said at one point you were short and that you are no longer. is that the current position? >> i am very focused on apple today. >> i know you are, but carl icahn and bill eichmann were focused on herbal life. they were focused on that on the network. >> we will concentrate today on helping apple shareholders unlock the value in their balance sheet. >> okay. >> so let's get to that because what we really need to do is we need to have shareholders speak up for themselves. >> at the end of the day, david, you're doing this because your ainto the at all happy with the fact that they have got a third of the market cap sitting in cash and you want them to do something about it? >> no, no, no, i'm happy for

them to have a third of the market cap in cash this is a clever idea that enables them to keep the cash for all the reasons they want to keep it and yet unlock the value for shareholders. it's win/win situation. they keep the cash, we get the value. >> david, take us behind the scenes though. you were talking to apple privately. why -- this seems to me to be pay back for that? seems like they are taking this off the table purposely -- >> what happens, they did some sort of a corporate governance review and they came up with some ideas as to how to improve their corporate governance and they say that absolutely nothing to do with our preferred idea so they put three ideas together that they thought were, like, for the corporate governance percentage i know cal pers working with this for them. they put it on a proxy to eliminate the ability to have preferred stock. we think that unfortunately that kind of ran into our idea. so, what we are saying right now today what shareholders need do

is they need to -- if they support this, they need to vote against apple's proposal number two that takes away the company's ability to issue this sort of high yield preferred from their charter. >> okay. >> if they do so get a good critical mass to do so, to send that kind of a message to apple's board, they have told me that they are going to re-evaluate this idea and i think if there is a lot of interest in shareholder support, i think we have an outstanding opportunity to create a win/win situation where apple gets to keep its balance sheet and its cash and all of its strategic flexibility and shareholders will get the value that is embedded within that. >> david, let me ask you an operational question about apple. this is a little bit about the finances of apple. when you think about apple and innovation and the future of this company and where the stock could go based on what the company is doing based on what they are doing with their cash or balance sheet, do you have hope? do you have anxiety? what are you thinking? >> apple is fantastic.

made over $20 billion in cash last quarter, more money than amazon has made in its entire life. apple's got 30-plus percent margins, amazon less than a percent. i'm not short amazon, i'm just making a comparison. both the companies traded the same price the sales multiple. it's utterly misvalued by the market because there's just too much -- there's just too much noise at the moment. but i think thatted business is doing very well, i'm very optimistic about their near-term prospects. i think that there's a lot of confusion relating to the guidance in this coming quarter and i think the company, the stock is going to do very well and i think it is going to do exceptionally well if they pay attention to what we are saying today. >> aren't you worried at all about margins compressing there? it is part of a fundamental shift, isn't it as well, david? i know there's a lot of noise around apple, but the stock has gone from 705 to where it currently sits at 460 and moving

as we are having this conversation but there seems to be a bit of a fundamental shift in the apple story. >> i would think that more than any bad news has been priced into the decline. you know, you have a company right here, i have just explained to you how essentially they could, at some point, distribute $500 per share in preferred and still have a company that lots of earnings, 140 a share of cash on its balance sheet. i think there is a tremendous upside to this story. >> when it was marching toward its record highs last year, it was kind of a stock that could do no wrong and started to hear price targets like $1,000. do you think that is still feasible? >> i think if the company continues to execute and the company unlocks the value within its balance sheet, either in the way i'm describing or in a similar fashion, it still seems very much on the table to me. >> you have more than 1 million shares, correct? >> yes, ma'am >> 1.3, is that right? >> that is what we had, i think, at the record date.

>> do you have complete confidence, as we have this conversation today in tim cook? >> i think my interactions with tim cook have been universally positive. fwhaunchts doesn't -- i'm not sure if that really answers the question. are you confident that he has the ability to keep apple on the sort of trajectory that you and other shareholders would demand? >> look, i don't think apple's going to grow 80% a year anymore but i think if valuation, it doesn't need to. i think that from everything i've seen, i think tim is doing an excellent job. i've enjoyed my conversations with him. i think he has the right idea for apple and i think apple is going to succeed under his leadership. >> let me rephrase what scott just asked you. do you think the company is worse off without steve jobs? >> well, of course you can't replace steve jobs but i think in some places, the company, you know, obviously will miss him but there's other places were there's opportunity, like what we're talking about today.

i think some of the depression mentality we were talking about with apple, i think that same came from steve jobs. and i think with his passing there is san opportunity for a toll, you know, shed some of that thinking and to move in a more forward-looking attitude toward its capital allocation in a way that could be very rewarding to shareholders. >> david, i know you wanted to focus on apple and i feel like we've actually spent a good deal of time doing that. if you would indulge us just for a moment, there's a lot of questions that i'm sure viewers have about your take on where green mountain stands. i know odd short on that. you mentioned amazon earlier. could you just give us a little bit of where you stand on those two issues? i love your thoughts on herbalife, i know you want to be hire on apple, but i do think that the audience deserves a chance to hear where you are. >> to be clear we don't have any position in amazon at all. i was just bring up as an analogy to apple because of the valuation disparity relative to

the margins, so on and so forth. so, we are not really involved there. >> odd short position at one time though, no? >> no. no. i don't think so. certainly not in the last five or ten years. >> green mountain? >> green mountain. yeah, we are still short green mountain. we think yesterday, they managed to sort of stuff the chan well brewe brewers. we think it is a very low quality earnings results. we think the k-cups came in below forecast. we think the sales forecast had to be reduced. it seems to us like a classic channel stuff. when you have high levels of brewers and low levels of k-cups it tells you that people are using the brewers less, in other words, fewer k-cups per brewer that kind of tells me that our long-term thinking that our story has peaked i think is intact. >> david, try one last time with herbalife with bill ackman or dan lobe now? >> no position with herbalife. >> want to make a friend today?

you're friends with both, i think? >> my friend today are the thousands of apple shareholders who i'm hoping will join in voting against the proposal to eliminate the prefer sod that we can unlock the value. >> david, we got to run. thank you for calling in. we do appreciate it. thanks to scott and mandy. make sure you join us tomorrow. "squawk on the street" begins right now. >> thanks so much. >> thank you. what a half hour of television morning. welcome to "squawk on the street". david einhorn wanting to vote against the issue of preferred stock. saying apple's plan would restrict the ability of board to unlock value on apple's balance sheet, comparing the company to an old grandmother who is literally hoarding cash. take a listen. >> apple has a problem, we

think, which is it has a cash problem. it has a mentality of a depression. in other words, people who have gone through traumas, and apple has gone through a couple tram nas its history, they can sometimes feel like they can never have enough cash. >> that, guys, we have watched the stock move in the past half hour. jim, early thought you >> what the she can talking about? look, yeah, this is a way to bring out some value. i want them to grow. i want them do an acquisition and grow. i think that i don't want a preferred because that does -- i know he said this doesn't necessarily preclude that. it doesn't necessarily change their capital position. i think it's an interesting way to approach it. i think what's far more important was deet press mentality issues, they just seem to think that it's good enough to have cash when they reported, david, remember, you felt there was a level of arrogance to the

idea that they don't even address the cash. >> i do when you talk to shareholders, they will tell you in three years' time this could be a company, if you make the assumption s on how much cash they are generating that could have $275 billion in cash. that's right you 275 billion. their cash needs are nowhere near that, more like 33 billion over that time period. not is a say they aren't moving too to that idea. einhorn may be in a position to credit for t in '06, they pressured microsoft to return capital they did. although they have a huge cash short yet again. i don't quite follow. i understand what preferred is. it is convoluted. >> the heart of having this much a cash on the balance sheet, $145 per share in cash, break down what it means turk the shareholder. the fact in einhorn's letter, he said that apple's management was willing to evaluate green light's proposal that signals the company may be hearing

shareholders' cries to do something with that tremendous amount of cash and that of itself is a positive sign for shareholders, they might consider doing something with cash that is a change that is a change worth noting. >> they did offer. i think that if they increased the dividend, the stock would go up. buy back stock if they buy back stock aggressively, not just a little bit this stock would go upship. an interesting method of returning capital, doesn't necessarily, you say, impact the cash position. regard it is a convoluted way. simple